Fed’s Preferred Inflation Gauge PCE Up 2.3% Annually, But Traders Raise Bets On 25 Bps Rate Cut In Dec
Prices for goods decreased 0.1% while prices for services increased 0.4%. Food prices increased less than 0.1% and energy prices decreased 0.1%.
FollowThe Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, increased 0.2% in October and rose 2.3% through the 12 months, according to the Bureau of Economic Analysis.
Although both figures stood in line with estimates, the annual figure was slightly higher than the 2.1% rise seen in September this year.
Prices for goods decreased 0.1% while prices for services increased 0.4%. Food prices increased less than 0.1% and energy prices decreased 0.1%.
Excluding food and energy, the PCE price index increased 0.3% during the month while on an annual basis, it rose 2.8% — again in line with expectations.
Despite the headline inflation coming in higher, traders have increased their bets that the central bank would reduce rates in its December policy meet by 25 basis points.
According to the CME FedWatch Tool, the odds of a quarter-point reduction in the upcoming FOMC meet rose to 70% on Wednesday compared to 59.4% a day ago.
Following the release of the data, benchmark U.S. indices were trading in the red with the S&P 500 down over 0.51% and the Nasdaq Composite losing over 1% on Wednesday noon.
Both the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust, Series 1 (QQQ) were trading in the red. On Stocktwits, retail sentiment ranged from ‘neutral’ to ‘bullish’ for these ETFs.
SPY’s Sentiment Meter and Message Volume as of 12:23 p.m. ET on Nov. 27, 2024 | Source: Stocktwits
QQQ’s Sentiment Meter and Message Volume as of 12:23 p.m. ET on Nov. 27, 2024 | Source: Stocktwits
Last week, Richmond Fed President Thomas Barkin reportedly said that the U.S. is more vulnerable to inflationary shocks compared to the past with businesses ready to tackle increased protectionism and readily passing on costs to consumers.
“We’re somewhat more vulnerable to cost shocks on the inflation side, whether they be wage-[related] or otherwise, than we might have been five years ago,” he told the Financial Times.
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